Japan's Economy Declines as Overseas Sales Suffer by American Tariffs
Japan's economy has recorded a decline for the initial time in six quarters, primarily caused by weakening overseas shipments as a result of newly imposed American tariffs.
G7 Economic Standings
The Japanese economy stands as the first Group of Seven nation to announce an GDP decline in the previous three-month period.
With the United States still needing to release its GDP figures for Q3 2025, the current Group of Seven growth leaderboard show:
- The French economy: +0.5% quarterly growth
- United Kingdom: +0.1%
- Canada: 0.1 percent (provisional estimate)
- Germany: 0%
- Italian economy: 0%
- Japanese economy: -0.4%
Tourism Shares Slump during Political Dispute with Beijing
Alongside the GDP decline, Japan is facing an intensifying diplomatic tension with China concerning Taiwan.
Stocks in Japan's tourism and consumer companies have declined sharply after China urged its citizens to refrain from traveling to Japan.
This decision by Chinese authorities intensified a political dispute that was sparked by comments from Tokyo's recently appointed PM about the possibility of deploying troops in the case of a potential Chinese attack on Taiwan.
The situation caused a wave of selling across Japan's leisure stocks.
- Oriental Land stock fell by 5.7 percent
- The department store chain plummeted by 11.3 percent
- The national carrier fell by 3.75 percent
"The China-Japan tension over Taiwan and Beijing's advisory discouraging travel to Japan brings short-term challenges for retail and hospitality sectors.
"Tourists from China represent roughly 25 percent of Japan's international visitors, making department stores, high-end shopping, and hospitality particularly vulnerable."
GDP Decline Breakdown
Japan's gross domestic product fell by 0.4 percent in the third quarter, as manufacturers' exports were affected by duties imposed by the US this year.
Exports were a major factor of the decline, dropping by 1.2% compared with the previous quarter, and were 4.5 percent lower than a year ago.
Earlier this year, the US administration had threatened Japan with a additional 25% tariff on its products, which was later lowered to 15 percent when the two countries concluded a trade agreement.
Consumer spending also fell, by 0.3% quarter-on-quarter.
On an annual basis, Japan's real gross domestic product contracted by 1.8% in the quarter through September.
"Japan's economy was stable in the initial six months of this year and today's GDP data showed that momentum is halted temporarily.
I expect Japan's economy to be returning on a moderate growth trend going forward."
The White House has recently acknowledged the impact of tariffs on Americans, reducing tariffs on food imports including meat, produce, coffee and bananas amid increasing concerns about rising costs.
Economic Calendar
- 8am GMT: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
